What Fire Insurance Options Will California Homeowners Be Left With?

Leaving behind destruction reminiscent of the firebombing of Dresden during World War II, the California wildfires in Palisades, Eaton, and Hurst continue to rage as firefighters battle to contain them. In addition to the fatalities, tens of thousands have had their homes and possessions incinerated.
After a natural disaster, the natural course of action is to rebuild. Whether after a hurricane tearing through Florida or the flooding caused by Superstorm Sandy, survivors find help through FEMA, the Red Cross, and something specifically designed for this sort of catastrophe — insurance.
Certain areas in California, including some affected by the wildfires, have long enjoyed some of the nation's lowest premiums based on home values. While these conflagrations are sure to have an effect, changes in how homes and property are insured in California are already evolving.
Halting the Exodus
California is known as a consumer-friendly state. It has the insurance regulations to back up that claim. These included caps that limited how much insurance companies could increase rates per year on homeowners. While this pleased California residents, insurance companies claimed it made insuring in the Golden State difficult, if not impossible.
As climate-related disasters increased in frequency and intensity, some insurers paused or outright restricted coverage in California. This included more than half of the twelve largest insurers in the country. For example, some 1,600 homes in the Pacific Palisades area lost their coverage by State Farm in July of 2024.
This was apparent in the significant uptick in the California Fair Access to Insurance Requirements (FAIR) plan later that year. The plan, funded by insurance companies but administered by the state, is supposed to be a bare-bones safety-net option for those who can't find coverage elsewhere. September of 2024 saw a 40% increase in homes accessing the plan over the previous year. Pacific Palisades had increases of 85%.
The CDI Steps In
The California Department of Insurance (CDI) had changes in motion before the latest disasters ignited. The Sustainable Insurance Strategy was created to walk the tightrope between enticing insurance companies to provide full access to coverage again while not overwhelming homeowners with rate increases for their policies.
Insurance companies are now permitted to use catastrophe models and the predicted effects of climate change to set rates and increases in California. This will likely mean higher rates in areas of risk. Consumers will have access to increased coverage as insurers are required to increase their market share in distressed areas.
More insurers mean a better chance of avoiding FAIR coverage, which is often far more expensive for homeowners. There are also grants available for the "hardening" of a home against wildfires. This can help reduce the chance of a wildfire spreading through vegetation removal, barriers, and roof sprinklers.
Avoiding a Scorched Earth Policy
While there's been a lot of finger-pointing about the inability to contain the wildfires so far, it's certainly not due to the heroic efforts of the firefighters. Unfortunate weather conditions bolstered by unprecedented wind gusts stand as the likely culprits. Once the fires are brought under control, the focus will hopefully shift to helping the victims rebuild their lives.
Without the recent changes implemented by the Sustainable Insurance Strategy, homeowners in California may have been facing few if any reinsurance options. Given the scale of the disaster, that may still be the case. While the hope is that the companies resume their previous coverage levels in California, having the lowest rates in the nation is no longer a reasonable expectation for the residents.
Related Resources
- Homeowners Insurance (FindLaw's Consumer Insurance Law)
- Top 10 Tips for Filing Fire Insurance Claims (FindLaw's Owning a Home)
- How the Stafford Act and FEMA Work (FindLaw's Consumer Protection Law)